Morgan Stanley, the world's second-largest securities firm by capital, and Deutsche Bank AG are adding emergency offices in Tokyo amid growing concern an earthquake will knock them out of business in Japan's capital.

"The cost isn't cheap, but it's insurance," said Thomas Riley, managing director of Morgan Stanley's Tokyo branch. Duplicate trading floors linked to the Tokyo Stock Exchange cost US$10 million to build and US$5 million a year to maintain, said Masatoshi Suzuki, who studies risk management at the Japan Research Institute Ltd in Tokyo.

The number of major earthquakes in the Tokyo area increased by 37 per cent since 2000, compared with the previous four years.

The Japanese capital has a 70 per cent chance of being hit by a magnitude 7 temblor in the next 30 years, government researchers said in August.

"The sense of urgency has been rising," said Keiji Doi, an associate professor at the University of Tokyo's Earthquake Research Institute. "The metropolitan area is high-risk."

New York-based Morgan Stanley, which has had backup offices in New York and London since the early 1990s, opened its first Tokyo centre in 2003 and is preparing another now, Riley said.

Deutsche Bank, Europe's third-largest bank by assets, may add a third backup office in Tokyo as soon as 2008, said Charles Underwood, the head of business continuity at the bank's Tokyo brokerage house.

Frankfurt-based Deutsche Bank already has a duplicate headquarters and a data backup centre in Japan's capital.

"The riskiest thing is not an earthquake," Underwood said. "Our business can be required to shut for a bomb threat or a fire in the basement. Meanwhile, our clients are still working normally, the competition is working normally."

Goldman Sachs Group Inc, which has only one Japanese office, keeps an emergency alternative in Tokyo and another outside the capital, said Orlando Camargo, the director of corporate communications in Tokyo for the New York-based firm. He declined to give details.

Takayuki Inoue, a spokesman at Merrill Lynch & Co's Tokyo brokerage house, declined to comment on any duplicate headquarters. New York-based Merrill has four branches in Japan.

"It's a significant issue for overseas brokers who don't have other offices or data centres," said Yukio Miyauchi, deputy head of corporate planning at Cosmo Securities Co in Osaka. "Japanese brokers who have branches throughout Japan should be okay."

The 20 overseas brokerage houses in Japan made a total of 63 billion yen (US$600 million) in commissions and 55.2 billion yen (US$525 million) of trading profit in the six months ended September 30, according to the exchange. Those amounts accounted for 28 per cent of revenue.

Japanese firms lag behind their overseas competitors in terms of backup preparation, said Masanori Kobayashi, the general manager in Tokyo at ABS Consulting Inc, the risk-management arm of the Houston-based American Bureau of Shipping.

Local brokerage houses had always calculated that a temblor would destroy both them and their competitors, said researcher Suzuki. The September 11, 2001, attacks on New York and Washington alerted them to other dangers.

(China Daily 03/10/2005 page11)